Update: Oct 07, 2018
The idea with multi-sig wallets is that multiple people can cooperatively control the funds in a wallet. Alternatively, the wallet can require approval from multiple devices owned by the same person i.e. a form of second factor authentication.
*For example, a common business use case would be a wallet that requires 2 people to sign, before a transaction is authorized to be spent.
The different individuals or devices that are involved in multi-sig wallet are called co-signers. It is also possible to create a multi-sig wallet where a subset of co-signers must sign spending transactions.
*For example you can create a multi-sig wallet with 4 co-signers of which any 2 must sign spending transactions.
Notes before proceeding:
- Each of the co-signers must use electrum smart
- Each co-signers’ wallet will contain their own auto generated seed as well as the Master Public Keys (MPKs) of the other co-signers.
- Due to the nature of multi-sig wallets it is likely that the different co-signers will create their wallet at different times when it is most convenient to them. So the process of creating a multi-sig wallet can be split into 3 main steps that can be done at separate times: Generate your seed and your master public key, communicate your MPK to your co-signers and receive their MPKs from them, create the final wallet and verify that the addresses are the same as the ones your co-signers are getting.
Step 1 Open Electrum SMART and create a new wallet file (enter a new name) then click next.
Step 2 Select Multi-signature wallet option, then click next
Step 3 Select the number of co-signers and how many are required to sign (authorize) a spending transaction, then click next.
- Number of Co-signers, is the number of people that are allowed to sign, “the pool of trusted signatories” (2-15 min/max).
- Number of Signatures, is the number of signatures to be made from the pool of Co-signers, before a spending transaction is complete (authorized) and allowed to be broadcast.
Step 4 Select “Create a new seed”, then click next.
Step 5 Electrum Smart will now display a “seed phrase” which you write down (physical record), this must be kept secret, as it can be used to recreate the wallet. Once written down and checked, click next.
Step 6 Confirm the seed phrase by typing it into the text box, then click next.
Step 7 Electrum Smart will now display your MPK “Master Public Key” which you can copy digitally and provide to your consigners. The MPK is a public key which needs to be shared with all Co-singers who are to be part of this multi-sig wallet setup. Once you have recorded and sent your MPK, then click “Cancel” This will close Electrum Smart.
Note: when communicating your MPK “Master Public Key” do not under any circumstances share your “Seed Phrase”. Only your MPK is to be shared.
Step 8 Ask each of your co-singers to do the above Steps 1-7 having each Co-signer share there MPK with you and their fellow co-signers. This should result in an equal number of MPK’s representing the number of Signatories intended for this Multi-Sig wallet.
A good practice would be to print the list of MPK’s and keep them where you have stored your “Seed Phrase” this will make it easier to setup the Multi-sig wallet in the future.
Step 9 Creating the Final wallet, once you have all the co-signers MPK’s you can create the multi-sig wallet.
Open Electrum Smart, giving the wallet a name, then click next
Select “Multi-signature wallet” option and click next
Select the number of Co-signers and the number of required signatures, the number of co-signers should equal the number of co-signer MPK’s you have received.
In the example below, 3 co-signers of which it takes any two signers to sign to spend funds. Click next once you have ready your “seed” and MPK’s details.
Step 10 Select “I already have a seed” and click next
Enter your “seed phrase” each co-signer will have one that is private and not to be shared with anyone, this forms the basis for each co-signer’s wallet to be able to sign with a private key essentially, once entered click next.
Verify that the MPK “Master Private Key” was the one you wrote down when creating the wallet in the first 1-7 steps, if correct, click next.
Step 11 Select “Enter co-signer key” and click next
Add one of the provided MPK “Master Public Key’s” you have received from your Co-signers and click next.
This process will repeat for the number of Co-signers selected for creating the Multi-sig wallet.
This demonstration was 3 co-signers, meaning, the “seed” plus 2 co-signer MPK’s are required to complete this demonstration setup, if it was a 15 co-signer setup, it would be 1 seed plus 14 co-signer MPK’s required to complete the multi-sig wallet setup.
Once all Co-signer MPK’s have been entered, you will be presented with a choice to password protect the wallet, if left blank the wallet is not encrypted nor password protected.
If you enter a password, note the “password strength” indicator, a strong password is advised, this password will be required to access the wallet.
Its advised that the option for wallet encryption is left on, and password protected, this will make it very hard for anyone who may gain access to the wallet to, do anything with it, even though it would require multiple signatures to spend any of the funds. Click next once you are ready to complete the wallet setup
Once wallet creation is finalized the electrum client will be ready for use.
The wallet will be in sync (look the same for all co-signers) moving forward. So the balance of the wallet, the addresses will all be the same on each co-singers Multi-sig wallet.
This completes the Electrum Smart Multi-Sig Wallet Setup.